Tag Archives: Inequality

Writing in Foreign Policy, Charles Kenny points out that, when you consider the global income distribution, middle-class Americans are actually part of the global 1%.

So by global standards, America’s middle class is also really, really rich. To make it into the richest 1 percent globally, all you need is an income of around $34,000, according to World Bank economist Branko Milanovic. The average family in the United States has more than three times the income of those living in poverty in America, and nearly 50 times that of the world’s poorest. Many of America’s 99 percenters, and the West’s, are really 1 percenters on a global level.

His point is sound – it’s one that has been made repeatedly by development gurus in response to the Occupy Wall Street protests. He goes on to make the case that we not only need more redistribution from the middle-class within countries, but across them as well. I’m sympathetic to this argument – `local’ inequality surely pales in comparison to the injustice of global inequality, the latter being associated with millions of people still stuck in absolute poverty.

Yet it’s clear from his writing in general that, when considering public policy, Kenny gives the welfare of people within and outside of the US equal weight. This is typical of those involved in international development – we wouldn’t be in this field if we cared only for our own (although maybe that statement is a little self-serving).

These preferences are consistent with John Rawls’s veil of ignorance (discussed earlier here), the argument that policy should be set before we know what position in society we will assume, a bit like Scott Bakula/Sam Beckett in Quantum Leap. For example, we might feel differently about US immigration policy if we thought there was a chance we might be born in Haiti. Kenny touches upon this briefly while discussing Herbert Simon:

Nor did the Western 99 percent “earn” most of their wealth, any more than the top 1 percent “earned” theirs. It’s the luck of where you’re born, according to the late Nobel Prize-winning economist Herbert Simon, who estimated that the benefits of living in a well-functioning economy probably account for 90 percent of individual income.

While I completely agree with this line of thinking – welfare weights shouldn’t be nation-specific, I think it’s a problematic way to convince others to embrace policies which are already unpopular, like taxing the middle class or easing restrictions on immigration.

Why? I think that most people just don’t feel the same way: average levels of altruism for foreigners are certain to be lower than for other citizens, so we should be wary of making arguments which are too dependent on non-discrimination. People still see citizenship as part of a social contract – we’re all in this boat together, even if we were randomly assigned to it. Those that ended up in leaky boats are not our immediate concern (again, not the way I feel).

There are no simple solutions to the challenge of getting people to broaden their concept of the `boat’ to include other nationals, although one could argue that the international Occupy protests, for all their faults, have actually helped in this regard.

Before they turned to cookie cutter stadium rock, RHCP cared about the Power of Equality.

I recently wrote a piece for Change.Org about something I’ve been thinking about a lot since I got back from South Africa: the disappearance of equity and redistribution from the vocabulary of development work. Up till about twenty years ago or so, it was a common practice in development work to talk about ‘social and economic equalization’ as an aim in its own right. This normally took the form of deciding on a manner in which redistribution of wealth could be made: through taxation and selective expenditure, through active redistribution of resources, such as land, through subsidization and so on. Over time, this approach was removed completely from the discourse. Structural Adjustment was one reason for this, as it tightened purse-strings and regulated taxation structure. It began to seen as counterproductive, discouraging private sector enterprise. There were many reasons for this decline, many of them sound.

However, the concept of redressing imbalances in society didn’t disappear from development discourse. It simply mutated to a new kind of approach, described as ‘pro-poor’ expenditure. The idea behind pro-poor expenditure is essentially that Governments and donors should focus on development activities that aim most directly at the poorest sections of the population. This is less controversial than redistribution though taxation, subsidization or resource transfer, since it simply means that the portfolio of development projects is weighted in a different way.

This approach is based on a very different set of assumptions about the economy than a redistributive policy mix. By focusing expenditures on activities that are most directly related to the poor, the implicit assumption is that economic development and the improvement in the lot of the poor is best served by spending on activities directly relating to them, and allowing the industrial and commercial agriculture sectors to work on their own, unaided or with much less aid. This is new: prior development policy looked more at the prospects for developing a modern economy, one which generates wealth rapidly, in the mould of most currently developed nations, and then seeking to protect the poor from the worst inequities and exploitation that such an economic system can generate.

This is a fundamental change, one that deserves far more thought than has been given to it. Spending more directly on the poor has an obvious intuitive appeal: you’re not relying on any opaque feedback mechanisms to see support translate into gains for the poor, as you would under the historically far more common approach of pushing for overall economic strength and then redistributing through taxation. The idea is that if you spend directly on the poor, if the project is worthwhile, you will see a gain in their standards of living.

Yet, there’s a big unanswered question about this approach: what is the long-term effect of such expenditure? Does it generate a fast-growing economy which creates jobs internally? Or does it create a sort of smaller-scale, class-based aid dependency, something like the morphine drip Matt suggests aid might function as?

I suspect the latter is much more likely than the former. In the last few years, I’ve had the chance to examine the donor portfolios in a number of countries, and have seen first hand how they use their influence to put pro-poor expenditure at the centre of local budgeting processes as well. Yet, the suspicion lingers that these approaches are not sustainable, and not generating further gains: though we’ve spent the last fifteen or twenty years supporting small scale agriculture in Malawi, for example, there is little sign that these small farms are becoming bigger farms, or even moving systematically away from food insecurity in the long-term. What’s more there’s no counter-example we can give: no example of a currently developed country or even a high-flying semi-developed or middle-income country that has followed the pro-poor route.